New York Times Co (NYT) 2010 Q3 法說會逐字稿

Good day and welcome to The New York Times Q3 2010 earnings conference call.

Today's call is being recorded.

A question-and-answer session will follow today's presentation.

At that time, if you would like to ask a question, press star one on your telephone keypad.

For opening remarks and introductions, I would like to turn the call over to Miss Paula Schwartz, Director of Investor Relations.

Please go ahead.

Thank you and good morning everyone.

Welcome to our Q3 2010 earnings conference call.

We have several members of senior management team here to discuss results with you including Janet Robinson, President and CEO, Jim Follo, Senior Vice President and Chief Financial Officer, Scott Heekin-Canedy, President and General Manager of The Times, and Martin Nisenholtz, Senior Vice President--Digital Operations.

All comparisons on this conference call will be for the Q3 of 2010 to the Q3 of 2009, unless otherwise stated.

Our discussion will include forward-looking statements and our actual results may differ from those predicted.

Some of the factors that may cause them to differ are included in the 2009 10K.

Our presentation will also include non-GAAP financial measures, and we have provided reconciliation to the most comparable GAAP measures in our earnings press release which is available on corporate website at www.nytco.com.

Now I will turn over the call to Janet Robinson.

Thank you Paula, and good morning everyone.

Our Q3 results demonstrate our ability to manage our business amid both uneven economic conditions in a period of intense transition for our industry.

Our print advertising trends and the steadfast growth of our digital advertising numbers are further proof of our determination and resilience amid these circumstances.

And while we have already been successful in greatly reducing our overall costs, we did continue to find ways to manage our expenses in the quarter, while maintaining our quality journalism and further investing in our digital strategy.

In ending the quarter slightly down and overall advertising revenue versus the Q3 of 2009, we have further confirmation that the path toward economic recovery will not always be a direct one, but let us not lose sight of the larger picture.

We have made substantial progress so far this year and we remain confident in our long-term strategy.

Some of the company's action that informed that competence were rigorously controlling our expenses with the 2009 cost reengineering presenting formidable comparison numbers, expanding digital offerings such as with the launch last week of our new NYTimes i-app for the IPad and the impending introduction of NYTimes.com pay model, continuing to keep our brand promise of high quality journalism as our very top priority and investing in our asset portfolio to support our core operations.

In the Q3, although we experienced marketplace volatility, advertisers sustained their spending levels across our products.

We were able to hold the company's operating expenses to roughly flat in the third quarter, overcoming the fact that 2009 saw the steepest expense cuts in our history and therefore presented very tough comparable numbers.

We maintained our relentless focus on managing costs to mitigate the effects of our revenue declines on operating performance in the quarter despite higher newsprint prices.

As we previously stated, these cost control efforts have in fact become more challenging in the second half of the year.

Our operating profit in the Q3,, excluding depreciation, amortization, severance and special items, was down 24% to $62 million from $81 million in the Q3 of 2009.

However year to date, through September, our operating profit on the same basis was up 45%.

On a GAAP basis, we reported operating profit from continuing operations of $9 million in the Q3 compared with the $24 million loss we sustained in the same period of 2009.

And year to date through September, our operating profit totaled $122 million, versus operating loss of $62 million for the same period in 2009.

Diluted earnings per share from continuing operations, excluding severance expense and special items, were $0.07, compared with $0.16 in the same period of 2009.

On a GAAP basis we reported diluted loss per share of $0.03 from continuing operations compared with a loss of $0.24 in the Q3 2009 period.

Our results involve a couple of special items which Jim will review with you.

Our digital offerings were front and center in the Q3, and we will get a brighter spotlight over the next few months.

In January, we announced we will be introducing a pay model for NYTimes.com in 2011, and we plan to release details on price and gate placement closer to the launch.

What I can share with you today is that the model will be designed so readers referred from third party sites such as blogs, social networks and search engines, will be able to access that content without triggering the gate.

This first click-free policy will preserve NYTimes.com significant reach and advertising inventory.

Separately, just a few days ago, we launched expanded content NYTimes app for the IPad, which builds on the editors choice apps and offers access to more than 25 sections of Times content, now with many more videos and photos continuously updated throughout the day.

The new application is free initially but will become a subscription product along with NYTimes.com case site in 2011.

Within the New England media group, we've seen two significant developments recently with regard to our website.

In August the Worcester Telegram and Gazette adopted a new metered model for its site, Telegram.com, giving all registered users free access to ten staff-produced articles per month but asking them to pay a monthly or daily rate for articles beyond that initial ten.

Newspapers subscribers continue to receive unlimited access to Telegram.com as part of their subscriptions.

Also early in the Q4, the Boston Globe announced its new digital strategy that will launch in the second half of 2011.

The Globe will split its digital brand into two distinct websites, keeping Boston.com free while establishing a subscription pay sight, BostonGlobe.com, that will feature content produced by the newspaper's journalist.

Boston.com, one of the nations largest regional websites, will continue to focus on being a one stop source for all things Boston that offers breaking news, sports, and weather, as well as classified advertising, social networking and culture information.

BostonGlobe.com will contain all of the stories and other content from the day's paper as well as exclusive reports, in-depth news, analysis, commentary, photos and graphics, video, and interactive features.

While we have not finalized our pricing for the subscription based site, we do know that access to BostonGlobe.com will be included for free as part of the print subscription.

Another one of our strategic focuses is managing our asset portfolio.

Early in the Q4 we made a $4 million investment in OnGo, a consumer service that will allow users to read and share digital news from multiple publishers, with similar contributions coming from the Washington Post and Gannett.

We expect that this service will launch before the end of the year and we will share more details at that time.

Now let me offer some more depth on our third quarter revenues.

Total revenues for the company declined 3%, with advertising revenues down 1%, circulation revenues down 5% and other revenues down 2%.

Substantial growth in digital advertising revenues which rose 15% partially offset a 6% decrease in print advertising revenues, and kept our total advertising revenue to down 1%, compared with the Q3 of 2009.

The positive impact of transitioning into a multi-platform company is undeniable in reviewing these numbers.

Online advertising revenue continued to grow at share of revenue and made up 27% of our total ad revenues in the quarter, up from 24% in the Q3 of 2009.

At the news media group which includes The New York Times, New England and regional media groups, ad revenues decreased 2%, due to lower print advertising.

By advertising category, national revenues were up 5%, retail was down 9%, and classified was down 10%.

Within the classified area, recruitment was flat, real estate declined 9%, and automotive was down 21%.

The print advertising decrease was 6% for the quarter, holding steady to progress from the Q2 and improving on the 12% decline in the Q1.

The decline for the quarter was largely offset by 22% growth, in online advertising revenues.

Our healthy online growth came in multiple categories.

National display advertising, which increased a noteworthy 31%, as well as all three major classified categories -- real estate, automotive and recruitment.

The group's total advertising revenues which declined 2%, year-over-year in the quarter, decreased 1%, in July, were flat in August, and declined 4% in September.

Breaking down the news media group in to component properties,, at The Times Media Group, advertising revenues were up 2% in the quarter, as slight decreases in print advertising were more than offset by impressive growth in online display and classified advertising.

The national print ad categories where we saw the largest gains were corporate, as a result of increased spending from energy companies.

Technology, due to increased expenditures from campaigns focused on Ereader devices, financial services led by higher spend from credit card companies which promoted credit opportunities for small businesses, and luxury goods, such as the fashion jewelry category where stores are using print to build brand awareness and drive traffic.

The national print ad categories where we saw the largest declines were health care, due to difficult comparisons from hospitals and health care companies that did not run in this year's Q3, live entertainment led by declines in concert advertising related to the weak economy along with limited support for Broadway show openings, and media due to tough comparisons from cable companies that did not repeat their business in the Q3.

Firm growth in online national advertising was led by strength in American fashion, media, and financial services.

It is important to remember that The Times is in a unique position in the national advertising market both in print and online, with about three quarter of its ad revenues coming from national advertisers.

Our luxury advertisers have been increasing their spending as evidenced by the revenue growth we've seen across our website in the past few quarters, including within our T-style franchise.

We attribute this to our industry leadership position and the online luxury ad space, which we have the expertise and determination to grow through constant innovation.

As the number of platforms where readers demand our content proliferates, the Company remains aggressive in advertising product innovation, building premier positions across all modes of delivery.

NYTimes.com continues to be an innovator in brand advertising and marketers come to us for our reach, the quality of our audience, and our ability to create and execute unique campaigns.

As a result we saw sizable gains in online display advertising during the quarter, with large format ad units from blue chip advertisers such as Tiffany, Polo, Ralph Lauren and HBO.

Not all Times categories were as strong as national in the Q3, although classified advertising at The Times Media Group decreased in all three major categories -- automotive, real estate and recruitment -- real estate ended the quarter stronger than it started.

Retail advertising revenues also ended in negative territory for the quarter.

At the New England Media Group, advertising revenues declined 9% in the quarter due to weakness in print advertising.

National ad revenues were down on online growth, could not completely offset print declines.

Decreases in the bank and media categories more than offset gains in financial services and live entertainment categories, retail advertising revenues were also lower despite healthy online gains led by softness in print categories including home improvement and health.

Classified advertising at the New England Media Group was soft in all categories except for recruitment which saw impressive improvement as the quarter progressed.

At the Regional Media Group, advertising revenues decreased approximately 6%, primarily due to weakness in retail and classified print advertising.

The rate of decline in classified real estate was fairly consistent while recruitment and automotive advertising rebounded during the quarter.

At the New England Media Group, advertising revenues declined 9% in the quarter, due to weakness in print advertising, national ad revenues were down as online growth could not completely offset print declines which were led by decreases in media and national automotive categories.

Retail advertising revenues were also lower despite healthy online gains led by softness in print categories including home improvement and health.

As a result of our commitment to constant innovation, we have developed a coveted technology expertise and we identified a progressive new way to leverage that knowledge in the Q3.

In August we announced Press Engine, a consultative endeavor, to help other publishers take advantage of the Times' already substantial experience in building digital products starting with apps for the IPhone and IPad.

We have already begun marketing this technology and design solution and have many clients committed.

We will launch Press Engine in the Q4.

Separately in August, we added a new social media feature to NYTimes.com called login with Facebook which enables users to link their NYTimes.com and Facebook accounts.

Users can then share articles from NYTimes.com with their Facebook friends on our site and on Facebook, and NYTimes.com pages will highlight the most popular Times content within Facebook and users network of friends.

We are also in the midst of significant expansion of our popular deal book blog, increasing our staff in that area along with our ability to cover breaking financial news.

Current and new advertisers to this section are already taking notice.

In the third quarter we also built on The Times brand with the launch of Nate Silvers 538 blog in our politics section, giving NYTimes.com a unique perspective on statistics across issues relating to politics, culture and sports.

All of these digital efforts have helped to ensure NYTimes.com remains the most highly trafficked newspaper website in the United States, and to keep the company as a whole among the top 14 most popular parent company sites.

With all of this discussion of the companies digital advancements, let me also assure you that our print product is alive and well.

We will be printing newspapers for many years to come in order to delight a very large and loyal base of readers and advertiser who are committed to the print reading experience and to the commercial benefits of advertising to a highly engaged print audience.

Building on that, expanding our reach and audience has ultimately driven our efforts to grow our audience in print, online, mobile, Ereaders, social media and other products.

In particular during the past couple of years, The Times has launched a number of mobile products.

In the Q3, we averaged more than 100 million page views per month from our mobile sites and apps.

We have also reached roughly 5 million downloads of our IPhone news app since its launch just over two years ago.

We continue to embrace innovative platforms and devices that provide rich experiences for our users and advertisers, are making good use of our large mobile audience.

Our IPad news app has several advertisers this month including Mercedes-Benz and its placements are sold out for the remainder of the year.

We had more than 650,000 total downloads of our editors choice apps, and it is becoming increasingly clear that top quality advertisers are prepared to follow New York Times content to any and every platform.

We are confident that our new IPad app will generate the same kind of enthusiastic following among both users and advertisers.

In the third quarter, the Company launched a variety of other IPhone and IPad products as well, with mobile development especially active at Boston.com.

In August we debuted the free Boston.com real estate app on the IPhone and the Big Picture Boston.coms popular blog, is now available as a paid app both on the IPad and the IPhone.

The International Harold Tribune is also launching its news app for IPad and IPhone in the Q4 which will be free at launch but eventually convert to a subscription product.

This app is among the first design by our internal Press Engine team.

The IHT will also launch its business navigator paid IPhone app later this year designed to help executives understand and negotiate business protocol around the world through select regional, business and travel headlines, and detail country and travel information.

And speaking of digital endeavors, the About Groups total revenue rose 6%, to $32 million in the Q3, advertising revenues rose 5% bolstered by solid gains in display advertising which were offset in part by lower cost-per-click advertising.

Display advertising showed strong growth in categories including consumer packaged goods, media and technology.

The About Group's operating costs increased 9% and operating cost excluding depreciation and amortization increased 10%, to $16 million, from $14 million, primarily because of higher compensation costs and marketing expenses.

Operating profit rose modestly as higher advertising revenues were offset in part by increasing cost in the quarter.

About's operating margin completed the quarter at a noteworthy 43%.

Total revenues from all of our internet businesses increased approximately 13%, to $89 million, from $79 million, in the Q3 of 2009.

Internet businesses accounted for 16% of the Company's revenues in the Q3, versus 14% in the same period of 2009.

Total internet advertising revenues rose 15%, to $78 million from $68 million in the same period of 2009.

Based on results in the first half of October, Q4 revenue trends for print advertising are expected to improve modestly from the levels of the Q3, while digital advertising is expected to be up approximately 10%.

Similar to the Q3, circulation revenues are expected to decrease 4% to 5%.

Now let me turn the call over to Jim who will give you more details on our results.

Thanks Janet.

Our expense controls remain solid.

Operating costs were roughly flat in the quarter despite higher compensation costs and newsprint prices mostly offset by lower benefits costs and decreases in various other expenses.

Getting to the special items, our Q3 earnings unfavorably affected by $0.07 for a write down of assets at the Boston Globe's print facility in Billerica, Massachusetts, and by $0.03 for an adjustments to estimated pension withdraw obligations under several multi-employer plans related to amended labor agreements at the Boston Globe.

EPS in the Q3 2009 have been favorably affected by $0.02, for a gain on the sale of regional media group real estate assets and unfavorably affected by $0.33 related to those same estimated Boston pension withdraw obligations and a curtailment charge for a company sponsored plan, and by $0.08 for a tax expense from a reduction of the company's deferred tax balances as a result of lower income tax rates.

Severance costs were less than $1 million, compared to $2.6 million in the Q3 of 2009.

Depreciation amortization decreased to $30 million from 31 million, and for the year we expect depreciation and amortization to be between $100 million and $125 million.

Newsprint expense increased by 20%, primarily due to prices that were 26% higher offset in part by a 6% reduction in consumption.

There were no additional East Coast newsprint price increases in the Q3, but newsprint prices were significantly higher than in the same period last year.

Newsprint prices increased steadily in the first half of the year.

We believe that newsprint price variance will continue to be unfavorable on a year-over-year basis in the Q4.

We expect high newsprint prices will negatively impact operating expense by approximately $13 million excluding a favorable impact on operating expenses as a result of lower consumption.

Net interest expense decreased very slightly in the quarter to $21 million, and for the full year, we expect net interest expense to be between $85 million and $90 million.

Reimburse of 14% notes, due in 2015 maybe called on or after January 15, 2012, at an initial redemption price of 105% of the principal amount plus accrued interest.

Given the terms, we currently intend to repay or refinance these notes at the earliest feasible date after January 15, 2012, depending upon available financing, or other sources of cash at the time.

Our focus on the balance sheet continues to deliver results.

We have continued to improve our liquidity position and generate strong cash flow, enabled us to finish the quarter with approximately $129 million in cash.

We reduced our net debt and capital lease obligations on more than a third to $646 million, from its balance at the beginning of 2009, and we had no outstanding borrowings excluding letters of credit under our revolving credit facility in the quarter.

Our effective income tax rate was 32.8% in the Q3.

The effective tax rate for the first nine months of 2010 was 54.8%, principally because of $10.9 million one-time tax charge for the reduction in future tax benefits for retiree health benefits resulting from the Federal health care legislation enacted in the Q1 of 2010.

The tax benefit in the Q3 in the first nine months of 2009 were unfavorably affected by $11.7 million in tax expense, due to the reduction of the Company's deferred tax asset balances as a result of lower income tax rates.

We have taken decisive steps to reduce capital spending which further contributed to our improved liquidity.

Capital expenditures totaled $9 million in the quarter, and $19 million year to date.

For the year, we project capital spending will be between $40 million and $45 million.

We remain diligent in managing operating expenses and expect Q4 operating costs to decline largely due to the severance expense levels in the same period last year, and operating costs excluding depreciation amortization and severance, to be comparable despite higher newsprint prices and costs associated with the launch of the NYTimes.com pay model.

As we mentioned, in our results this morning, we are well positioned to thrive in the evolving media marketplace thanks to the significant progress we have made and continue to make in reinventing our enterprise.

Despite an increasingly competitive environment and bottled economic conditions, successful efforts across our organization continue to contribute meaningfully to overall financial performance demonstrating our trademark excellence and resilience.

With that we would be happy to take your questions.

Thank you.

(Operator Instructions) Our first question today comes from Alexia Quadrani with JPMorgan.

Thank you.

A couple of questions.

First on the drop off that you saw in September, was that broad based across your geographies and segments or was it in one particular area?

In ad revenues in September.

That was characterized as a slowing of the improvement in the national categories and the improvement we've seen sequentially in the classified categories and about the same level of performance in the retail categories that we'd seen in earlier quarters.

In regard to Boston and the regionals it was same story in regard to national slowing in Boston, and in Florida and California we saw a softness in the September number as well.

Would you say it's fair just based on your comments for the fourth quarter that you've seen a bit of an improvement in October so far?

I think we are seeing a maybe modest improvement of what we had seen in September.

And would characterize our expectations for the fourth quarter similarly.

I'd add one thing to what I said a minute ago with regard to the sequential improvement, our main magazine has shown a decided improvement each quarter through the year improving probably 20 points, from Q1 to Q2 and then from Q2 to Q3.

So magazine schedules are on a different spending schedule than our newspaper and I think that there is perhaps some significance to that.

Then on a related question, I was surprised to see the classified autos so weak in the quarter, was there one area driving that or was that pretty broad based too?

We saw a slowing of advertising -- the improvement we've seen in advertising throughout the year, and it seems to be tied very directly to the falloff in advertising in automotive sales that started in August and continued into September I believe.

Then just sort of a bigger picture question probably for Janet, I guess if you're looking across your performance across all your segments, where do you continue to see real cyclical weakness, meaning, is there one area that is particularly depressed because the economic cycle where you would expect to see the more dramatic recovery whether it's in 2011 or longer term?

I think that from a standpoint of California and Florida, we are seeing weakness in those particular areas, particularly in Florida in regards to real estate.

I think that many of us would have hoped to see much more of a real estate rebound sooner than certainly now.

It continues to be a very weak category for all of our papers down there.

So I would point to California and Florida as particularly weak areas.

I think certainly with our digital performance we are seeing good strong growth in regard to what we see with the new applications that are being introduced and that is a bright spot for us, not only in regard to New York but we are seeing that in Boston as well and seeing good digital growth at our regional newspapers as well.

Okay.

Thank you.

Our second question today comes from Craig Huber with Access 342.

Can you update us on your status on your pension given the actions that you guys have done so far this year?

As you know we came into the year with an unfunded qualified plan of something north of $400 million.

We did make a discretionary contribution, early part of our second quarter, about $80 million so that certainly went towards improving the funded status.

That being said, really through midsummer, the equity markets were not cooperative and were generating material returns and interest rates have obviously not gone favorably and rates continue to come down so that's had a negative impact as well.

The funded status has improved.

I think the equity performance of the last month or so have contributed to that.

So while the funded status is lower the interest rates have not been helpful.

And then also, Janet, you talked about in your press release in your commentary about modest improvement you're expecting for news for ad revenues here in the fourth quarter, you obviously reported negative 1.7%, for this quarter here, can you just talk a little bit further about what you are seeing in October, I know this has already been asked, but is October trending better than that negative 1.7% or no?

Also what are you expecting for November and December?

Your backlog here of advertising is making you feel you can get better than the negative 1.7% for the whole quarter?

I don't think we can be that specific in regard to what we see, because visibility is very limited as you know, Craig, but we are seeing improvement in October and we have strong bookings in November and in December.

This is the strongest quarter usually for us in regard to particularly retail advertising.

But we are seeing many national schedules certainly be committed to as well.

I think that we were clear that we've got very big comps to be compared to in regard to the fourth quarter last year, but we feel as though there'll be modest improve in print, that digital will be about 10% up.

And that of course from a cost perspective, we are going to be continuing to work on the cost side of our business, to make sure that indeed we keep our costs in line and hopefully do an even better job than just keeping them in line.

We also have several key magazines in the fall, in the fourth quarter, we have a brand new editor in Sally Singer who has been a favorite of many advertisers and we feel as though her (inaudible) on T will be a very important move for us.

That will I think be something to watch going forward.

Can you talk a little further if you would about this up 5.5% number and About.com's revenues this latest quarter?

It's obviously a meaningful slow down from the first half of the year so obviously a tougher comparison, but what do you expect in that particular segment for the fourth quarter?

Sure.

As you point out on the CPC side actually we are comping against very tough numbers in Q3 of '09.

But in addition, we implemented an important mandated change by Google in the way we display our CPC ad units which affected click-through rates in the quarter.

So these two factors combined to significantly affects CPC in the quarter.

I should add that display had a strong quarter, though it softened somewhat towards the back half as the uneven economy affected the business.

I should also add that we've seen continued softness in October in both CPC and displayed advertising at About, but it's too early to call the fourth quarter.

As you know from the outset our ambition has been to diversify revenues at About.com and to focus on building a significant display sales team there.

We have done that, when we bought the business the business was almost entirely CPC, and now we are quite diverse in terms of the revenue streams.

So that effort continues.

That's why we made a modest investment in the quarter in terms of the trade advertising program that we rolled out as well as the addition of some sales talent in the group.

So we continue to focus very much on the display part of the business.

And lastly, Janet, if I could, your Boston Globe paper, how much would you say on average the newspaper advertising rate is down here year-over-year, and same question for regionals?

Thank you.

From a yield perspective, it's a modest decline.

I think the Globe is doing a very good job of diversifying its revenue base by bringing in a great deal more digital advertising but also focusing very much in regard to high rate lines business particularly on the national front.

That's similar for the regionals?

Regional, it's a modest decline in regard to yield, yes, from a perspective of the regionals.

In regard to The Times, I think that Scott can give you an overview.

We've got positive improvement in our rate yield and that's attributable to the, I believe, the customized programs that we do with our advertisers.

Include color and position, also where they fall on the rate card in their contract, so improvement in yield.

Like roughly 1% or so?

A few percentage points.

Few percent, okay, thank you.

We will go next to John Janedis with UBS.

Thank you, good morning.

Two questions please, one is -- you've somewhat commented on this already but the print only comp is a lot tougher in to the fourth quarter, your guidance clearly suggests some good underlying strength in the business, I'm just hoping you can talk through maybe what you are seeing in some of those key categories and are you seeing any meaningful political dollars in print or online?

Not meaningful political dollars at The Times in print.

We expect categories that have been strong for us for much of the year to continue to be strong in the fourth quarter.

Particularly second half of the year, luxury, hotel, corporate, tech, we are to your point up against difficult comps varied by category, where they fall in the quarter financial services is up against some very difficult comps in the fourth quarter.

Other categories in December in particular when we started to see the beginnings of economic recovery last year.

But on total we believe that the categories that have been showing the strength will continue into the fourth quarter.

I would just say for the Globe in regard to political, the Boston.com does benefit from political advertising online and there is a heated race in Boston so they are garnering more political advertising online.

Okay.

Thanks.

Just related to that, on the auto front you mentioned auto, one way or another is that a middling category, at least a national, not that it's a big category for you, but what are you seeing there?

Probably fair to characterize it as a middling category.

It's been growing very nicely through the year.

As I said until the industry saw the drop off in their sales, we expect it to recover pretty quickly.

Hopefully by the end of the quarter and we expect it to see some strength, carrying in to the new year as they advertise to support new products.

Okay.

Thanks.

On the earlier comments after a big ramp margins there declined somewhat, is this a beginning of a trend here and is that Google change going to impact you for the next three quarters?

Thanks.

To some extent it will.

Yes.

I think we should expect more modest growth on the CPC side for the next few quarters.

But the team is very focused on continuing to get as much out of the CPC business as possible.

And there is no reason to think that we won't be able to strengthen that somewhat.

In fact, I think we've seen in the last couple of weeks a firming up, a strengthening of the category.

But that cycling through will take place through the next three quarters as you point out.

I would also reiterate though, Martin's earlier comment about the display and the investment that we've made in the display team and we continue to make, not only in bodies but in expertise that indeed we've done very well with the display growth this year, and with the fourth quarter being an important quarter, for many categories, display can give us an opportunity to show more growth.

Thank you very much.

We will take our next question from Edward Atorino with Benchmark.

Hi, got a couple of questions for Jim.

On interest expense, it sounds like there is going to be a big jump in the fourth quarter in interest expense to get to your total for the year.

Am I hearing it right number one?

And number two in operating costs both for the fourth quarter and looking in to 2011, a lot of new things going on, can you absorb that in your normal cost plans or will these be additive costs going forward, the new products, the new online stuff, all that nice sexy new stuff?

I imagine it's costing some money.

Look on the online side I think the incremental costs are manageable within our regular core business, I don't think that's really a factor.

Obviously newsprint prices going into next year and until we comp through a lot of the price increases, that will be an increased cost but I think Janet made the point earlier, we'll continue to be aggressive on costs and find ways to offset that as we did in the third and the fourth quarter, we found ways to absorb some of the higher newsprint prices.

We are very focused on managing those costs.

We've given some conservative guidance on interest rates and I'm not sure I have much more to add to you on that.

Could you hold costs flat 2011 versus 2010?

We are just deeply in the middle of our planning season; I would rather not make any commitments at this point.

Okay, thanks.

And we'll go next to Doug Arthur with [Evercore].

Three quick questions.

Jim do you have the head count at the end of the quarter?

Somewhere around 7500.

It's about 4% down year-over-year and about the same on a year-to-date basis.

Okay.

Then the bump up in SG&A, year-over-year in the third quarter, is that due to the pay wall investment?

It's more comp related.

The pay wall has contributed some amounts in the quarter, others have gone the other way.

It's not a material number.

It's probably less than $5 million a quarter.

Some of that compensation I referred to earlier will reverse itself in the fourth quarter as well.

It's variable comp and the way we (inaudible) comp that's largely driven that number.

Finally, on national advertising, it was up almost 5% for the quarter but you discussed a fall-off in September, is there any way you could break it out by the month?

National was quite strong in July.

Low double digits.

Couple of points below that in August and just maybe a point of growth in September.

Okay.

Great, thank you.

We will take a follow-up question from John Janedis with UBS.

Hi, one quick housekeeping question.

Is that third quarter share count a good run rate?

Yes.

It should be.

Yes.

What was the reason for the ramp down, Jim, do you know offhand?

Basically share price driven.

When options and some of the warrants related to the inverse transaction are share price driven.

With the pressure our share price has been under has driven that number down.

Great, thanks.

We will go next to Craig Huber with Access 342.

I do have a follow up, Janet, you mentioned two months ago you rolled out a pay wall on your Worcester paper outside of Boston, I believe that newspaper is roughly 70,000 daily circulation, I'm curious, can you quantify how many people are now paying for access to that website for roughly two months?

It's a little early to call but first and foremost we are on plan.

We are serving all of our commitments to our advertisers which is very good news and traffic is responding as we anticipated with the exception that unique users are actually up.

We are pretty pleased to be honest Craig in regard to the work that's been done and how the circulation and subscription revenue is transpiring up there.

There is lots of learning (inaudible) to say that's going on that we will share with our entire organization but it's a little early to give specifics in regard to where we are, but we are very pleased in regard to being on plan and in some cases above plan.

And then my last question, online help wanted revenue, if you're comping the quarter, what is the percent change there, please?

It ws about flat, Craig.

Okay.

Thank you.

1%.

1% up.

Okay.

Thanks.

This concludes today's question-and-answer session.

Thank you very much if you have additional questions please give us a call.

This concludes today's call, thank you for your participation.